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Lack Of New Discoveries, Slower Mine Project Development Weighs On Gold Industry: SNL

By Kitco News
Friday July 18, 2014 10:45 AM

(Kitco News) - A downwards trend of new discoveries and slower development of mine projects is weighing negatively on the gold industry, said SNL Metal & Mining.

“Over the past 24 years, mining companies discovered 1.66 billion ounces of gold in 217 major gold discoveries, SNL Metals & Mining's 2014 edition of Strategies for Gold Reserves Replacement shows,” they said. “While that sounds like a significant amount of gold, it falls short of the 1.84 billion ounces produced over the same period.

“In addition, the amount of gold discovered and the number of major discoveries (defined as any deposit with a minimum of 2 million ounces of contained gold) have been trending downward over time, from 1.1 billion ounces in 124 deposits discovered during the 1990s to only 605 million ounces in 93 deposits discovered since 2000.”

According to SNL, over the last 15 years is even more alarming for potential production from major discoveries as “assuming a 75% rate for converting resources to economic reserves and a 90% recovery rate during ore processing, the 674 million ounces of gold discovered since 1999 could eventually replace just 50% of the gold produced during the same period.”

They also point out that only a third of that discovered gold is actually put into reserves or production, and ongoing political, environmental, or economic hurdles lessen the chances of that gold becoming available for production in the near term even further.

SNL said that the time it takes to bring a deposit into production is also a cause for concern as between 1985 and 1995, 27 mines with confirmed discovery dates began production an average of eight years from the time of discovery.

“The time from discovery to production increased to 11 years for 57 new mines between 1996 and 2005, and to 18 years for 111 new mines between 2006 and 2013. (For this analysis, expansions and mine redevelopments are not included as they are not comparable with new mine developments.),” they said. "The length of time from discovery to production is expected to continue trending higher: 63 projects currently in the pipeline and scheduled to begin production between 2014 and 2019 are expected to take a weighted-average 19.5 years from the date of discovery to first production.”

The firm attributes the length of time between discovery and production to increased and more detailed feasibility work, hurdles imposed by greater social and environmental awareness, longer and more demanding permitting processes, increased need for infrastructure and processing capacity due to lower ore grades and/or more remote locations, limited availability of capital, and scarcity of experienced personnel.

“As it can take several years of exploration for a new discovery to be defined, it is too early to tell whether the surge in discovery-oriented exploration since 2010 has moderated the downward trend in the number and richness of new discoveries,” SNL said. “The tough financial environment for junior explorers over the past two years suggests that the longer-term downward trend in discoveries will likely continue for at least the next few years.”

By Alex Létourneau of Kitco News aletourneau@kitco.com
Follow Alex Letourneau @alex_letourneau




Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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